Contracts - Other Contract

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Assignment

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An assignment is a transfer of a right or obligation to another party. Real estate contracts may be assigned.An investor could secure an option to purchase a parcel of land and then assign that contract to a third party. The third party would be able to fulfill the terms of the contract and purchase the property. Remember that in this situation it is still the original party that is liable for the completion of the terms of the contract to the seller of the property.

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Novation

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Novation is similar to assignment, but requires agreement of all parties involved in the contract. In simple terms, a novation is when one party in a transaction is replaced by another party with unchanged terms of the contract. Novations allow burdens and liabilities to be transferred to a new party.

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Power of Attorney

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Power of Attorney is the authorization to act for another party. It is required to be authorized in writing, and in Utah, must be notarized. A power of attorney may be specific or general.If the power of attorney is specific, the person chosen to act for the grantor of the power of attorney is only able to do certain acts for the grantor that are outlined in the written and notarized authorization document.

For example, Meg may give Jill a power of attorney to sign a commercial lease for Meg's business while Meg is on vacation in Austria. Jill only has power to do one specific thing in representation of Meg, this is a specific power of attorney.

If the power of attorney is general, the person chosen to act for the grantor of the power of attorney is able to do anything in representation of the grantor.

For example, Tyler is in the Marines and is headed to war for at least a year on the other side of the world. He grants a power of attorney to his mother Karen to take care of any personal or business matters that arise while he is overseas. This is a general power of attorney, because Karen has the power to do anything in representation of Tyler.

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Acknowledgement

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An acknowledgement is an affirmation or certification that something is done properly. In real estate, important contracts are acknowledged to promote accuracy and to prevent fraudulent acts.Important contracts are signed by principals and it is important that the identities of the principals are verified in order to prevent fraud.

An important role in acknowledgement is that of a notary public. A notary public verifies the identity of each signer. After verification of their identity, a principal party will sign and date the contract, and then the notary public will stamp the contract certifying that the signature of the person was indeed signed by the correct party.

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Contract Differentiation

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Contracts between buyers and sellers, or landlords and tenants typically only contain terms that apply to each party. Agency is not involved in the terms except an agency disclosure may be made.

Typical contracts only between principals:REPCLeasesLease Purchase Agreements Contracts that establish terms between agents/brokers and clients are different from contracts that are only between principals.

Typical contracts related to agency:Buyer Agency AgreementExclusive Right to Sell Listing Agreement and Other Listing Agreements

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Time is of the Essence

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When a contract states that time is of the essence, then the time periods for the execution of the terms of the contract are firm or required. By stating that time is of the essence, the parties are bound to complete the terms of the agreement within the established time period, if not completed, then parties may be liable for damages for breaching the contract.

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Abrogation

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Abrogation is the act of cancelling an agreement or pretending that the agreement was never made.Contracts may be abrogated when terms of the contract are not met, based on the contingencies that are in the contract.

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For example, a buyer has a contingency in the REPC that the property will only be purchased if it has no major defects found in the home inspection. During the home inspection, the inspector finds that the entire foundation is cracked and sinking. The buyer cancels or abrogates the contract based on the contingency being met in the REPC.

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As Is Clauses

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An as is clause ensures that both parties are aware that an item being sold is being sold in its present condition. The item being purchased will be in the same condition at the time of settlement.

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Short Sales

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In the real estate and finance industries economic hardship sometimes is encountered. When a hardship happens to a property owner and there is a mortgage or note on the property, the mortgage is at risk of default. If the agreed upon payments are not paid by the property owner to the lending institution, the lending institution may foreclose on the property, meaning that they would sell or take ownership and possession of the property due to the default.In order to avoid foreclosure, a property owner and lending institution may decide to do a short sale. A short sale usually would occur when a borrower can no longer afford the monthly payment and the proceeds from a sale of the home would not pay off the remaining mortgage balance. Typically, short sales are offered subject to approval of the third party lending institution or bank that hold the note on the property.

When short sales happen there are additional contracts that must be completed in the transaction, because not only does the seller have to agree to the terms of the REPC, so does the lending institution. A short sale addendum and disclosure will usually be a part of the REPC.

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Bank Owned

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Occasionally the bank may purchase the property at auction and take ownership and possession of a property. They typically do repairs to the properties and offer them back on the market for sale.Bank owned properties may be purchased in the same manner that other properties are purchased from a property owner.